Macro and Politics

* The Treasury will hold a 4-year TLREF-indexed bond, as well as the direct sales of a 2-year USD-denominated bond and a 2y USD-denominated lease certificate today. The Treasury tapped the domestic markets to the tune of TL37bn (including non-competitive saleS) via yesterday’s 2y fixed-coupon and 4y CPI-indexed bond auctions. Demand conditions remained relatively weak, with the bid-to-cover ratio in the fixed-coupon auction standing at 1.56x, while the average compounded yield came in at 41.8%. In the CPI-linked auction, the bid-to-cover ratio was also subdued at 1.41x, with the average real compounded yield realized at 5.48%. Accordingly, the Treasury’s total domestic borrowing since the beginning of the month has reached TL81.2bn. According to the domestic borrowing strategy for the three-month period covering May–July 2026, the Treasury plans to conduct TL381.7bn in domestic borrowing against TL347bn in redemptions in May, implying a rollover ratio of 110%. Following today’s auction and direct sales, the Treasury will conduct direct sales of a 1.5-year gold-denominated bond and a gold-denominated lease certificate on May 18 and finalize its domestic borrowing program for May.

* Based on our calculations derived from the analytical balance sheet, we estimate that the CBT’s gross FX reserves increased by USD6bn to USD171.6bn in the week of April 30 – May 8, while net FX reserves rose by a limited USD619mn to USD54.2bn. We expect the official reserve data, scheduled to be released on Thursday at 14:30 local time, to point to a reserve buildup broadly in line with our calculations.